At December 31, 2011, Murchi Company Reported Total Assets of Rs22,320,000

At December 31, 2011, Murchi Company reported total assets of Rs22,320,000, including inventory of Rs5,580,000 and net income of Rs7,365,600 for 2011.The reported inventory was overstated by Rs1,020,000.Which of the following is true with regard to Murchi's 2011 financial statements (ignore income taxes) ?

A) Total assets are understated and total equity is overstated by Rs1,020,000.
B) Cost of goods sold is understated and total equity is overstated by Rs1,020,000.
C) Cost of goods sold and total equity are both understated by Rs1,020,000.
D) Total assets and Net income are both overstated by Rs1,020,000.